Factory output falls on weak auto production

February 16, 2013

WASHINGTON - U.S. factories slowed production in January after two solid months of cranking out goods. The weakness mainly reflected a big drop in output at auto factories that is likely temporary.

Manufacturing output fell 0.4 percent in January from December, the Federal Reserve said Friday. The decline followed increases of 1.1 percent in December and 1.7 percent in November.

Overall industrial production edged down 0.1 percent in January compared with December. Output In mining, the category that covers oil and gas drilling, fell 1 percent. Utility output jumped 3.5 percent, as a cold snap led more households to turn up their heat.

Article Photos

AP PHOTOIn this Jan. 10, file photo, a Nissan truck is lowered by rail to a work station in Canton, Miss. The Federal Reserve reports on production from factories, mines and utilities in January on Friday.

Factory output, the most important component of industrial production, was dragged lower by a steep 3.2 percent decline in auto and auto parts production. The auto industry is coming off its best year for sales in five years, one of the few bright spots in an otherwise bleak manufacturing sector. Sales continue to rise, so production will likely rebound in February.

Still, many factories outside the auto industry have been hurt by a slowdown in consumer spending and weaker global growth that has dampened demand for U.S. exports.

Economists expect healthier output in 2013, partly because U.S. companies are sitting on large amounts of cash and appear poised to invest some of it in equipment and machinery. Economies in Europe are also healing, and growth in Asia is expected to improve.

"Global growth will still be fairly weak this year, which will prevent industry from firing on all cylinders. But there's no denying that industrial conditions have recently improved," said Paul Dales, senior U.S. economist at Capital Economics.

While manufacturing output was down in January, analysts noted there were big revisions that made November and December look even better than first reported. For the fourth quarter as a whole, manufacturing output rose at an annual rate of 1.9 percent, a significant improvement from the earlier estimate of a slight 0.2 percent rate.

A second report Friday showed that manufacturing activity in the New York area posted a big gain in February. The New York Federal Reserve's Empire State survey rose to 10.04 in February, compared with a negative 7.78 in January. It was the biggest one-month improvement in this index in more than two years.